Archive for the Climate Change Category

Project-based carbon offsetting is like a lottery with no prizes

Posted in Climate Change with tags , , , , , , , , , on December 7, 2009 by Dan

At Carbon Retirement, we have just published a short piece of research into the efficiency of carbon offsetting through the Clean Development Mechanism, covered today by the BBC. It shows that for every £1 spent on CERs by voluntary buyers, 28p goes to the project’s capital expenditure and maintenance costs.

The chart below, from the report, summarises the costs per CER, with the grey chunks representing project expenditure. Project costs total £3.78 per CER, or 28% of the price paid by the final buyer.

Costs in the CDM market, per CER

Costs in the CDM market, per CER

This isn’t a study of profitability for any of these actors and the costs at each stage might be reasonable. The big chunk taken by the pCER buyer in our model, for example, may be a fair reflection of the risk it holds that the project will not deliver CERs.

However, the research shows that the efficiency of the overall system is very poor. While some transactional costs are inevitable and you could never expect 100% of your money to go to project funding, 28% seems far too low. Imagine if a development charity told you that 72% of your donation went to middlemen and admin fees!

Co-incidentally, 28% is also the proportion of UK national lottery revenue that goes to charity. So, buying carbon offsets to mitigate climate change is like buying lottery tickets to give money to charity. With carbon offsetting, you don’t even win a prize!


Is carbon still following oil?

Posted in Climate Change with tags , , , , on August 23, 2009 by Dan

In January I looked at European oil and carbon prices to show how they were reacting to the economic recession. Today I had another look at these two markets to see what’s happened over the past six months.

The graph below (click to expand) shows the December 2009 EUA contract (from ECX) and the Europe Brent spot price (from the Energy Information Adminstration, converted in Euros using currency data from OAndA). The prices have been indexed to January 2007. Historically, carbon has largely followed oil.

In 2009 the trend seems unclear. While daily trading news is full of headlines like “carbon nudges higher on strong energy complex”, carbon seems have recovered less than oil. In January 2009, the nominal prices of oil and carbon were both around 70% of January 2007. At the end of last week, oil was at 110%, while carbon was at 80%.

Performance of EUAs vs crude oil

Performance of EUAs vs crude oil

I don’t have any clear commentary to offer just now. Glancing at the graph, it looks like carbon has fallen behind oil by about three weeks, but that doesn’t feel like a very plausible theory. I’d be interested to hear any thoughts.

Why does carbon offsetting struggle with its reputation?

Posted in Climate Change with tags , , , , , , , , , on August 23, 2009 by Dan

Carbon offsetting has a reputation problem. Some parts of the ‘carbon’ industry act dishonestly or are not environmentally motivated, and people outside the industry tend to lump the diverse organisations involved in carbon trading together. When an exposé story appears in the media, we all suffer.

This week there was a story about suspected VAT fraud in carbon markets. Dodgy brokers were buying carbon credits abroad (which does not attract VAT), and then selling them in the UK and applying VAT. They are thought to have made £38m. It’s called carousel fraud or ‘missing trader’ fraud (because the broker disappears with the tax). One funny thing about this story is that none of the coverage says which market the fraud was in. Were these CDM credits (the carbon offsets that the UN allows governments to use)?

Twitter was full of people saying that this story confirmed carbon trading to be a con. Several newspapers referred to “so-called carbon credits”. Why “so-called”?

Another example is the campaigns by NGOs like Friends of the Earth and WWF against the use of offsets in statutory carbon trading schemes. Under the Kyoto Protocol, governments of rich countries can offset some of their emissions by funding projects in the developing world. The NGOs feel this allows them to wriggle out of their responsibilities.

Friends of the Earth said:

Dangerous climate change will be unavoidable if the UK, EU and USA succeed in increasing the use of carbon offsetting, Friends of the Earth is warning in a new report released today [Tuesday 2 June 2009] that exposes carbon offsetting as ineffective and damaging.


The problem with carbon offsetting is that at best it robs Peter to pay Paul – with no net benefit for the planet. All too often, offsetting is simply used to justify business-as-usual behaviour in the UK and other countries.

These charities are referring to the CDM or whatever succeeds it when the Kyoto Protocol expires in 2012. While both have misgivings about voluntary carbon offsetting, neither would object to its use by a company or individual who is doing all they can to reduce their own footprint. Unfortunately most people are not aware of the difference between voluntary and statutory carbon markets and articles like the above cast the whole sector in a poor light.

The challenge for organisations involved in carbon trading is to help their market understand what happens to their money. No customer can be expected to spend their money if they believe it will be appropriated by fraudsters.

Do young people care about climate change less than everyone else?

Posted in Climate Change with tags , , , on August 19, 2009 by Dan

I just ran a workshop on climate change with  120 bright and articulate Quakers aged 13 – 20. Some of the results of the discussion were so interesting that I thought they were worth sharing.

In one session, I asked the young people whether they agreed or disagreed with various statements. The results looked like this:

Agree Don’t know Disagree
I like marmite 48% 3% 49%
I support a football team 40% 0% 60%
Twitter is a good idea 8% 46% 46%
Climate change should concern everyone 98% 0% 2%
It’s hard to know what to do about climate change 70% 0% 30%
Climate change and how we respond to it are among the biggest issues I worry about today 5% 45% 50%
I am personally making a significant effort to help reduce climate change through how I live my life today 15% 35% 35%

The last two of these questions were lifted from HSBC’s annual ‘climate confidence’ survey (pdf). Here’s how the data compare.

% of young people that agreed in the workshop (from table above) % of UK that agrees (from HSBC survey 2008)
Climate change and how we respond to it are among the biggest issues I worry about today 5% 26%
I am personally making a significant effort to help reduce climate change through how I live my life today 15% 26%

What’s going on there? How come this group of well-informed (most of them knew where Mozambique is, which was more that I could say) and thoughtful world-inheritors cares less about climate change than the general population? I put this to them, and the two most common answers were:

We’re being more honest. In the national survey, people were probably trying to look good.

(that’s my theory)

Teenagers are focused on problems closer to home. Climate change is too abstract to concern young people.

In another session, I asked the young people to rank the effectiveness of various actions in terms of addressing climate change. The picture below shows how they stack up (each column represents the consensus of a group of around 12, with the top action rated most effective – click to expand).

  • Red = Go vegetarian
  • Yellow = Stay in the UK instead of flying abroad on holiday
  • Orange = Discuss climate change with your friends
  • Blue = Write to a supermarket to tell them to be greener
  • Green = Write to your local politician to ask them to do more about climate change
  • Purple = Join a campaigning NGO
Results from the Quaker workshop

Results from the session with young Quakers

The clearest message is the variation, and the groups said that people don’t have the information to understand the effectiveness of actions like these. But to force a crude ranking, where the top rated action scores 6, the second scores 5 and so on, the order from most to least effective is:

  • Stay in the UK instead of flying abroad on holiday (47)
  • Join a campaigning NGO (40)
  • Write to your local politician to ask them to do more about climate change (38.5)
  • Go vegetarian (31.5)
  • Write to a supermarket to tell them to be greener (31)
  • Discuss climate change with your friends (22)

One thing is for sure – young Quakers prefer Marmite to Twitter.

Thanks to Yorkshire Friends Holiday School for inviting me to talk.

Carbon Retirement – vote for us!

Posted in Climate Change on March 18, 2009 by Dan

Carbon Retirement is a company I’m involved with, and it retires EUAs as an alternative to carbon offsetting. We believe that retirement of cap and trade allowances offers a credible alternative to project-based carbon offsets.

One exciting piece of news this month is that we’ve reached the final of the Daily Mail and Make Your Mark ‘Enterprising Young Brits’ competition. Part of the competition is a public vote for your favourite business. We’d love to win – we don’t spend any money on marketing and it would give us some free publicity. You have to sign in to the website to vote, which takes 2 or 3 minutes, so this is really a competition to see whose supporters are the most tenacious! We know it’s ours – so if you can spare the time please vote for Jane Burston and Dan Lewer here.

The competition closes on Tuesday 24th March at 11am.